- Network Revenue Up 51% to $9.7 million
Kowabunga!® (AMEX: THK), the leading provider of interactive performance-based advertising networks and technology platforms, today reported financial results for the first quarter ended March 31, 2008.
First Quarter 2008 Results:
- Revenue for the first quarter totaled $21.0 million, up 5% from $20.1 million in the immediately preceding quarter, and up 19% from $17.7 million in the first quarter of 2007. Network segment revenue increased 172% to $9.7 million from a year ago and increased $3.3 million or 51% from the immediately preceding quarter. This increase more than offset declines in revenue from the Direct and Advertising segments.
- EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization expenses) was $0.4 million, down 75% from $1.7 million in the first quarter of 2007. The decrease resulted principally from a shift in revenue mix to lower margin Network revenues, as well as audit fees related to Sarbanes Oxley compliance and staff additions, particularly in the Network division.
- Net loss was $2.3 million, or $0.03 per fully diluted common share, which included impairment charges of approximately $1.2 million, or $0.01 per share, primarily associated with the closing of the Company’s international operations. This compares with a net loss of $527,000, or $0.01 per share, a year ago, which included a $0.1 million charge for dividends and accretion of redeemable preferred stock.
During the first quarter and subsequent weeks, the Company reported the following key events:
- Launched version 2.0 of the Fair Isaac® Click Conversion Score™, a groundbreaking new scoring model for the PPC industry and exclusive feature to its ValidClick AdExchange™. In version 1.0, each publisher and sub-publisher received a “conversion score” to rate publishers and adjust keyword bid prices based on their ability to drive conversions for advertisers. Fair Isaac Click Conversion Score 2.0 extends this technology to give each publisher and sub-publisher separate conversion scores for every advertiser and ad campaign as soon as statistically relevant data are available.
- Named COO Stan Antonuk as interim CEO to fill the vacancy resulting from the resignation of Scott P. Mitchell.
- Named Mitch Tuchman to its board of directors as an independent board member and Chairman of the Board. Mr. Tuchman brings more than 25 years experience in venture capital, public finance and technology to his board position. He currently serves on the Board of Directors of Workstream Inc. and Kintera. He received his MBA from Harvard Business School and his BA from Boston University.
- Hosted a forum on ValidClick AdExchange in conjunction with ad: tech 2008 in San Francisco. Kowabunga!’s chief technology officer John Linden, and Fair Isaac's chief research officer Dr. Andrew Jennings, shared the podium to explain how ValidClick AdExchange is closing the value-price gap in pay-per-click advertising.
- Relocated the Utah-based office of iLead Media to Florida in an effort to overcome operational issues and benefit from the synergies of consolidation at the Kowabunga headquarters. This move was part of an effort undertaken during the quarter to streamline operations and to realize cost savings and allocate talent accordingly.
Interim chief executive officer, Stan Antonuk, stated, “We are pleased with our sequential revenue growth, which was driven primarily by the great progress during the quarter in our Network division where revenues were up significantly. We are working with publishers and advertisers to underscore the competitive edge that our Network’s unique performance-based approach affords. As economic uncertainty makes advertisers more competitive in their need to show a return on investment, our offering becomes even more compelling. As previously stated, we expect our Network segment revenue to double in 2008 from 2007. With $9.7 million in revenue in the first quarter, we are currently on plan to achieve that goal.
“However, we are equally disappointed with performance of the non-network areas of our business where the advertising and direct segments did not perform to expectations in the quarter. As a result, we believe it is prudent to withdraw our guidance with respect to achieving year-over-year revenue and EBITDA growth. Meanwhile, we have taken -- and will continue to take -- aggressive and necessary steps to ensure profitability in these business units. We relocated the Utah-based office of iLead Media to our Florida headquarters to overcome operational issues and benefit from the synergies of consolidation and to streamline operations. We also reduced staffing levels in other non-core operations in the Direct segment that were not performing to plan. These actions have resulted in the elimination of more than $2 million of annualized Direct segment costs. In addition, we closed the U.K.-based Web Diversity operation, which was posting losses without significant signs of a turnaround. The U.K. remains a compelling market for us, but we could no longer continue to allow the business to drain capital on an ongoing basis,” concluded Antonuk.
Q1 2008 Financial Detail
Network
Network revenue for the quarter totaled $9.7 million, up 51% from $6.4 million in the previous quarter and up 172% from $3.6 million a year ago. The Network business, which represented 46% of first quarter 2008 revenue, comprises an online search network ($5.5 million), an affiliate network ($3.9 million), and software solutions and Web hosting ($0.3 million). Network EBITDA was $1.0 million, down 12% from $1.1 in the previous quarter and down 10% from $1.1 million reported a year ago.
Direct
Direct business revenue in the first quarter of 2008 totaled $8.1 million, down 8% from $8.8 million in the previous quarter and down 15% from $9.5 million reported a year ago and represented 31% of total first quarter revenue. Direct is primarily engaged in the interactive direct marketing of internally generated and third party offers. Revenues are derived from online memberships, lead sales and list management services, as well as direct-to-consumer services including online dating, online education, and home business opportunities. Direct EBITDA was $1.7 million, down 38% from $2.7 million in the previous quarter and down 15% from $2.0 million a year ago.
Advertising
Advertising revenue for the first quarter totaled $3.7 million, (17% of total revenue) down 33% from $5.4 million in the previous quarter and down 22% from $4.7 million a year ago. Advertising comprises traditional offline and online advertising agency services. Advertising EBITDA was ($0.3).
Conference Call Information
The Company will host a conference call today at 4:30 p.m. Eastern Time. To participate in the conference call, investors may dial 800-762-8932, or 480-629-9029 for international callers. A replay will be available beginning Thursday, May 8, 2008 at 7:30 p.m. ET, through Thursday, May 22, 2008 at 12:00 a.m. ET. To access the replay, dial 800-406-7325 (pass code: 3868625). International callers may dial 303-590-3030. The call also will be available via webcast and archived on the investor relations section of the Company's website at www.kowabunga.com.
About Kowabunga! Inc.
Think Partnership Inc. is now doing business under the name “Kowabunga! Inc.” and will seek formal shareholder approval to change its legal name to Kowabunga! Inc. later in 2008. Kowabunga Marketing Inc. will continue as a subsidiary, operating its affiliate network and related products.
Kowabunga! Inc. is the leading provider of interactive performance-based advertising networks and technology platforms. Kowabunga! provides a comprehensive and integrated set of scalable and cost-effective marketing solutions for both advertisers and publishers. These solutions increase customer retention and revenues through a diverse set of related marketing channels, including affiliate marketing, click-fraud-protected pay-per-click advertising, lead generation, interactive direct marketing, integrated offline advertising, campaign management, public relations, and branding. Kowabunga! also operates several direct-to-consumer services including online dating, online education, and home business opportunities. High-profile brands include ValidClick AdExchange™, MyAP™, PrimaryAds™, BabyToBee™, Second Bite® and MSA. For more information, visit www.kowabunga.com.
Forward Looking Statements
Statements made in this press release that express the company's or management's intentions, plans, beliefs, expectations or predictions of future events, are forward-looking statements. Those statements are based on many assumptions and are subject to many known and unknown risks, uncertainties and other factors that could cause the company's actual activities, results or performance to differ materially from those anticipated or projected in such forward-looking statements. For a discussion of these risks, see the company's report, as filed with the Securities and Exchange Commission on Form 10-K, filed March 31, 2008, under the section headed “Risk Factors.” The company cannot guarantee future financial results, levels of activity, performance or achievements, and investors should not place undue reliance on the company's forward-looking statements.
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THINK PARTNERSHIP INC. |
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CONSOLIDATED BALANCE SHEETS |
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March 31, 2008 and December 31, 2007 |
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March 31, 2008 |
December 31, 2007 |
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| Unaudited | |||||||
| Assets | |||||||
| Current Assets | |||||||
| Cash and Cash Equivalents | $ | 275,773 | $ | 2,578,246 | |||
| Restricted Cash | 1,589,893 | 1,668,302 | |||||
| Accounts Receivable net of allowance for doubtful accounts of $442,339 and $383,545 | 15,655,068 | 13,705,554 | |||||
| Unbilled Revenue | 679,027 | 601,898 | |||||
| Refundable Corporate Income Taxes | 436,522 | 436,522 | |||||
| Prepaid Expenses and Other Current Assets | 1,032,151 | 749,781 | |||||
| Total Current Assets | 19,668,434 | 19,740,303 | |||||
| Equipment and Software, net | 4,579,441 | 4,679,541 | |||||
| Other Assets | |||||||
| Goodwill | 77,887,798 | 79,799,635 | |||||
| Intangible Assets | 15,055,446 | 16,522,212 | |||||
| Other Assets | 1,150,771 | 383,822 | |||||
| Total Other Assets | 94,094,015 | 96,705,669 | |||||
| Total Assets | $ | 118,341,890 | $ | 121,125,513 | |||
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Liabilities and Shareholders Equity
Current Liabilities |
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| Notes Payable –Current Portion | $ | 1,567,561 | $ | 1,301,537 | |||
| Note Payable – Related Party | 27,365 | 37,326 | |||||
| Accounts Payable | 7,581,276 | 5,823,294 | |||||
| Deferred Revenue | 981,022 | 1,274,177 | |||||
| Deferred Tax Liability | 619,207 | 470,205 | |||||
| Accrued Expenses | 2,416,230 | 2,385,723 | |||||
| Total Current Liabilities | 13,192,661 | 11,292,262 | |||||
| Long-Term Liabilities | 13,146,171 | 14,188,265 | |||||
| Shareholders’ Equity | |||||||
| Preferred Stock, $.001 par value: | |||||||
| Authorized Shares — 5,000,000 — none issued or outstanding | 0 | 0 | |||||
| Common Stock, $.001 par value: | |||||||
| Authorized Shares — 200,000,000 | |||||||
| Issued Shares — 69,795,024 as of March 31 and 70,295,024 as of December 31 | |||||||
| Outstanding Shares — 67,048,950 as of March 31 and 67,646,350 as of December 31 | 69,795 | 70,295 | |||||
| Additional Paid in Capital | 105,698,653 | 106,524,393 | |||||
| Accumulated Deficit | (13,547,759 | ) | (11,245,536 | ) | |||
| Accumulated Other Comprehensive Income | 736,406 | 1,139,715 | |||||
| Treasury Stock | (954,037 | ) | (843,881 | ) | |||
| Total Shareholders’ Equity | 92,003,058 | 95,644,986 | |||||
| Total Liabilities and Shareholders’ Equity | $ | 118,341,890 | $ | 121,125,513 | |||
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THINK PARTNERSHIP INC. |
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CONSOLIDATED STATEMENTS OF OPERATIONS (“Unaudited”) |
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Three Months Ended March 31, 2008 and 2007 |
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Three Months Ended
March 31 |
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| 2008 | 2007 | ||||||
| Net Revenue | $ | 21,041,575 | $ | 17,661,284 | |||
| Cost of Revenue | 12,527,300 | 8,335,314 | |||||
| Gross Profit | 8,514,275 | 9,325,970 | |||||
| Operating Expenses | |||||||
| Selling, General and Administrative | 9,598,293 | 8,962,062 | |||||
| Impairment of Intangible Assets | 1,187,800 | 0 | |||||
| Amortization of Purchased Intangibles | 1,040,257 | 1,028,315 | |||||
| Loss from Operations | (3,312,075 | ) | (664,407 | ) | |||
| Other Income(Expenses) | |||||||
| Interest Income | 7,186 | 21,148 | |||||
| Interest Expense | (217,169 | ) | (225,469 | ) | |||
| Other Income, Net | 0 | 54,086 | |||||
| Loss before Income Tax Benefit | (3,522,058 | ) | (814,642 | ) | |||
| Income Tax Benefit | (1,219,835 | ) | (287,401 | ) | |||
| Net Loss | (2,302,223 | ) | (527,241 | ) | |||
| Accretion of Redeemable Preferred | 0 | (135,527 | ) | ||||
| Net Loss allocable to common shareholders | ($2,302,223 | ) | ($662,768 | ) | |||
| Net Loss Per Common Share | |||||||
| Basic | ($0.03 | ) | ($0.01 | ) | |||
| Fully Diluted | ($0.03 | ) | ($0.01 | ) | |||
| Weighted Average Shares(Basic) | 67,100,653 | 65,646,865 | |||||
| Weighted Average Shares(Fully Diluted) | 67,100,653 | 65,646,865 | |||||
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
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Net Revenue by Industry Segment |
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| Three Months Ended March 31, | ||||||||||||||||
| 2008 | 2007 | Year to Year | ||||||||||||||
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Amount |
% of |
Amount |
% of |
% Change |
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| Revenue by Segment | ||||||||||||||||
| Network | $ | 9,705,337 | 46 | % | $ | 3,574,126 | 20 | % | 172 | % | ||||||
| Direct | 8,105,622 | 39 | % | 9,524,904 | 54 | % | -15 | % | ||||||||
| Advertising | 3,651,336 | 17 | % | 4,655,886 | 26 | % | -22 | % | ||||||||
| Elimination | (420,720 | ) | -2 | % | (93,632 | ) | -1 | % | 349 | % | ||||||
| Total Revenue | $ | 21,041,575 | 100 | % | $ | 17,661,284 | 100 | % | 19 | % | ||||||
| Three Months Ended March 31, | ||||||
| EBIDTA Reconciliation | 2008 | 2007 | ||||
| Pre tax | ($3,522,058 | ) | ($814,642 | ) | ||
| Amortization | 1,832,772 | 1,640,407 | ||||
| Amortization- Stock Options | 173,760 | 280,320 | ||||
| Depreciation | 537,544 | 378,657 | ||||
| Impairment | 1,187,800 | - | ||||
| Net Interest Expense | 209,982 | 204,321 | ||||
| Derivative Adjustment | - | (30,718 | ) | |||
| TOTAL EBIDTA | $ | 419,800 | $ | 1,658,345 | ||
| EBIDTA By Segment | ||||||
| Network | $ | 966,017 | $ | 1,068,791 | ||
| Direct | 1,656,228 | 1,961,553 | ||||
| Advertising | (294,373 | ) | (67,826 | ) | ||
| Corporate | (1,908,072 | ) | (1,304,173 | ) | ||
| Total EBIDTA | $ | 419,800 | $ | 1,658,345 | ||
Kowabunga!®
Tanya Boggs
Director of
Marketing, 727-324-0046 x2170
tanya.boggs@kowabunga.com
or
ICR
Inc.
Ina McGuinness, 310-954-1100